Fundamental changes to restraints of trade: what employers need to know about proposed reforms to post-employment restraints and cartel conduct

The Federal Government has released for consultation the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 (Cth) (Bill) that, if enacted, will:

• ban non-compete clauses for employees earning less than the high-income threshold (currently $190,100 per annum), casuals and pieceworkers;
• regulate how non-competes are enforced for all employees over the high-income threshold;
• ban co-worker non-solicitation clauses for all workers; and 
• proscribe no-poach and wage-fixing agreements as cartel conduct, subject to certain specified exceptions. 

These restrictions will apply to new employment contracts and employment arrangements or variations made after the legislation commences. “Employment arrangements” include contracts of employment, deeds, workplace policies and other arrangements that regulate the relationship between the employer and employee. Terms that do not regulate the employment relationship, for example a sale of business agreement and certain shareholder agreements, are not included in these restrictions.

Fair Work Act amendments

Non-competes banned for workers earning less than $190,100 and for casual employees

The Bill amends the Fair Work Act 2009 (FW Act) and the Competition and Consumer Act 2010 (CCA) to ban non-compete clauses for workers earning less than the high-income threshold, as well as for all casuals and pieceworkers regardless of their earnings. 

The definition of ‘non-compete term’

The Bill defines a non-compete to include any term or condition of employment that restricts, prohibits or prevents an employee from (or adversely affects them for) seeking to commence other employment or to be involved in any business or undertaking, or commencing subsequent employment, after the termination of their employment.

The ban extends to terms that indirectly restrain employees – for example, by requiring the repayment of bonuses, imposing significant out-of-pocket payments, or denying a severance package if the employee joins a competitor. A term or condition of employment is not a ‘non-compete term’ only because the term or condition:

• restricts the use or disclosure of confidential information through appropriately drafted confidentiality clauses, although clauses which are so broad that they effectively prevent an employee from working for a competitor will be captured by the Bill;
• provides for retention incentives, including deferred bonuses or stock options; or
• relates to agreed notice periods, including paid gardening leave arrangements where the employee continues to receive full pay.

Restraints survive for high-income employees, with restrictions

For employees whose annualised full-time equivalent earnings exceed the high-income threshold (and who are not casual employees or pieceworkers), non-compete terms remain permissible – but are subject to the following new statutory requirements.

1. They must be necessary to protect a legitimate interest – limited to: (a) protecting confidential information; or (b) protecting professional or personal relationships with customers, clients or professional networks gained during employment.
2. They must be reasonable – having regard to whether the term goes no further than necessary and is reasonable as between the parties.

In addition to the non-compete ban, the Bill prohibits co-worker non-solicitation clauses for all employees, regardless of their income. These are terms that restrict or prohibit an employee from recruiting or attempting to recruit a co-worker or former co-worker (including contractors) to commence employment or be involved in another business. 

The Bill also prohibits cascading clauses, that is clauses containing multiple geographic or time based restraints, such as clauses that seek to restrain an employee for a period of 12 months, nine months or six months, which are designed to ensure the validity of at least one of the restrictions. The Bill provides that the use of cascading clauses will lead to the entire term having no effect and being unenforceable, which means that employers must carefully consider tailoring restraint areas and periods for employees on a case-by-case basis. The amendments in the Bill will override State laws on post-employment restraints for most employers such as the Restraint of Trade Act 1976 (NSW).

Penalties and other consequences of breach

The prohibitions on including non-compete and co-worker non-solicitation terms in employment arrangements are civil remedy provisions, meaning contraventions will attract civil penalties of up to 60 penalty units ($21,840), 600 penalty units ($218,400) for serious contraventions and maximum penalties of five times these amounts (exceeding $1 million) for employers who are bodies corporate. In addition, the prohibited terms will be of no effect and unenforceable. A penalty may also be imposed where an employer enforces or threatens to enforce a non-compete term that is unenforceable or has no effect. 

Competition law amendments 

No-poach and wage-fixing agreements now cartel conduct

The Bill also amends Australia’s competition laws with the aim of removing artificial barriers to labour mobility and preventing businesses from colluding to artificially push down wages in labour markets. Contracts, agreements or understandings between businesses that prevent or restrict the hiring of each other's staff (‘no-poach’ agreements) or that fix, control or cap remuneration and employment conditions (‘wage-fixing’ agreements) will now constitute cartel conduct that is in breach of competition law. 

Contravention of the cartel conduct provisions, including entering into, or giving effect to, a no-poach or wage-fixing agreement can attract significant penalties. For corporations, penalties may be the greatest of $100 million, three times the benefit obtained from the contravening conduct, or 30 per cent of the corporation's turnover during the breach period. For individuals, penalties may include substantial fines and, in the case of serious cartel offences, criminal imprisonment. 

The Bill acknowledges that there are a narrow set of circumstances under which conduct that would otherwise constitute a no-poach or wage-fixing agreement should be permitted as a matter of public policy. Consequently, there are targeted exemptions for:

• conduct permitted under the Fair Work Act or State or Territory industrial law;
• Government wage setting where the only parties to the agreement are Government authorities;
• employment secondments and labour hire arrangements;
• codes and standards that impose minimum labour requirements, 
• professional sporting leagues (i.e. salary caps for professional players); and
• joint ventures.

In particular, the Bill extends the existing joint venture exemption for cartel conduct to no poach or wage fixing provisions where a party can establish that: 

1. the no-poach or wage-fixing provision is for the purpose of a joint venture and is reasonably necessary for undertaking the joint venture; 
2. the joint venture is for the production of goods, the supply of goods/services, or the acquisition of goods and services; and
3. the joint venture is not carried on for the purpose of substantially lessening competition; 
4. the joint venture is carried on jointly by the parties to the agreement; 
5. each staff member is given notice of and consents to the term. 

The extended joint venture exemption is also time limited. For it to apply to a no-poach provision, the effect of the no-poach provision cannot extend beyond three months after the day on which the staff member ceases to be involved with the joint venture. The requirements are stricter for a wage-fixing provision, where the exemption will only apply if the purpose or effect of a wage-fixing agreement ends on the day the staff member ceases to be involved with the joint venture.

In addition to the above, consistent with current competition law, parties who are related bodies corporate can continue to make agreements containing no poach or wage-fixing provisions, so long as the agreement is only limited to the corporate group. 

Finally, unilateral conduct without any collusion element, such as an employer merely deciding that they do not want to hire from a certain competitor, will not constitute a no-poach agreement and will not fall foul of competition law. 

What should employers do now?

The draft legislation is open for consultation until 2 October 2026.

Employers should:

1. review existing non-competition and non-solicitation clauses in current employees’ employment contracts and template contracts, including giving consideration to more targeted, tailored restrictions for employees based on their seniority, access to and use of confidential information and the nature of their customer connections;
2. consider alternative means of protecting legitimate interests, including intellectual property and confidential information protections in employment contracts and other arrangements with employees, notice of termination provisions and gardening leave provisions;
3. consider setting salaries for key employees above the high-income threshold, including those who have access to and use confidential information or who maintain close customer connections, above the high-income threshold; and
4. seek legal advice before relying on any narrow statutory exemptions or seeking to restructure agreements under the new competition law provisions. In particular, businesses should audit existing commercial arrangements, including joint venture agreements, secondment arrangements, labour hire contracts and any informal understandings with other businesses that contain no-poach or wage-fixing provisions, given that implementing these provisions after commencement will be a contravention even if the arrangement pre-dates the passage of the Bill. 

Summary of proposed changes

^{[1] Under the Fair Work Act amendments only; there is no explicit exception in the current proposed Competition & Consumer Act changes.}